Consumer Agency Finds the Credit Bureaus’ System of Dispute Resolution Does Not Work for Consumers

The Consumer Financial Protection Bureau has released a study of the operations of the three national credit bureaus.

The CFPB found serious problems with the credit reporting system, and in particular, the dispute system.The bureaus’ automated dispute system in which the credit bureau often limits its role in disputes to little more than assigning codes as to what type of dispute is at issue. The bureaus do not examine documents, contact consumers by phone or email, or exercise any form of human discretion in resolving a dispute.

The vast majority (85%) of credit reporting disputes are passed on to the company (known as a furnisher) that provided the information. However, the documentation consumers mail in to support their cases is virtually never sent to furnishers for them to properly investigate and report back to the credit reporting company.

In 2009, the National Consumer Law Center documented the same problems with the credit reporting dispute system and the potentially devastating impact on consumers who can’t get errors in their credit reports corrected in their own report available on the NCLC website, Automated Injustice: How a Mechanized Dispute System Frustrates Consumers Seeking to Fix Errors in Their Credit Reports.

The CFPB report said a different system is needed for dispute resolution with respect to reporting by debt collectors, who generate 40% of disputes to the credit bureaus despite constituting only 13% of the accounts in credit reports.

Debt collectors have little incentive to correct errors in response to a dispute as removing negative information means losing the opportunity to collect the debt. Their main objective is to get paid and they don’t care about their relationship with the consumer. They don’t even care if they have the wrong person–they just want to get money.

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